Our central conclusion is that when it comes to changes in the wage structure and returns to skill, supply changes are critical, and education changes are by far the most important on the supply side. The fact was true in the early years of our period when the high school movement made Americans educated workers and in the post-World War II decades when high school graduates became college graduates. But the same is also true today when the slowdown in education at various levels is robbing America of the ability to grow strong together.

The main argument is that terrorists "turn to terrorism for social solidarity", i.e., that they join terror organizations less for political aims and more because they themselves are alienated and outcasts in search for belonging and, perhaps, as an outlet for violent or authoritarian tendencies. They are loners in search of meaning rather than radicals in search a way to express their political views:

Individual terrorists often have no prior involvement with a group's political agenda, and often join multiple terrorist groups with incompatible platforms. Individuals who join terrorist groups are frequently not oppressed in any way, and often can't describe the political goals of their organizations. People who join terrorist groups most often have friends or relatives who are members of the group, and the great majority of terrorist are socially isolated: unmarried young men or widowed women who weren't working prior to joining. These things are true for members of terrorist groups as diverse as the IRA and al-Qaida.

I think this makes lots of sense. During the late 60s and early 70s there was a vogue in many European countries for politically active youngsters to join the far left - a movement that at the most extreme produced the Bader-Meinhof group in Germany. Here in tiny and peaceful Norway a number of people who later wondered how they got into it joined various versions of marxist-leninist groups with the stated aim of violently overthrowing the state. (A great novel by the author Dag Solstad, later turned into a film, explores these mechanisms, telling the story of a small-town high school teacher who joins the movement because he falls in love with one of the leaders). This caused a number of bookish intellectuals from well-off homes to try to act and talk like "the people" (often with hilarious results) and take menial jobs with a view to start strikes, unrest and eventually, the great revolution.

The movement petered out eventually, due to a lack of examples of marxist-leninist success stories, better career opportunities elsewhere, the demands of family life and, most importantly, the failure of the general populace to join the cause. Today, most of these people (especially the ideological leaders) are found in relatively good positions in society and will not thank you for bringing up this period. (In one ironical twist, one of them is a professor of journalism - an interesting position for someone who once wanted to force the press to serve the needs of the proletarian dictatorship.)

Now, imagine what would have happened if the Norwegian state had declared war on these groups and instituted all kinds of controls in the name of national safety? Suddenly they would have increased in importance, had some legitimate cases of persecution (heavy-handed security always produces incidents) and play off the fear and irritation induced by surveillance and controls.

Instead, the Norwegian government largely ignored them, aside from discreet monitoring for weapons violations and espionage. To the extent that anyone was arrested, the perpetrators were charged with clear violations of current law and given sentences similar to those of anyone else.

The movement did not achieve much: A few strikes, a half-hearted rebellion at a few universities, a radical newspaper that still scrapes by (and occasionally is rather good, especially after they toned down the ideology,) "progressive" clothing fashions, some small groups of old professors with weird research streams, reams and streams of newspaper commentary, and that's about it.

Now, imagine if the current war against terrorism had been pursued as a large-scale police investigation rather than a war, with terrorists being pulled into regular courts, security controls set up for security rather than show, publicity focused on a general toning down of the whole thing, money spent on improving the situation for various downtrodden groups, and military solutions employed as the absolutely last resort, and then only under the auspices of the UN.

I think al-Qaida would be reduced to a group of fringe Islamist fundamentalists with uncertain political aims, lots of fratricidal infighting (when the populace ignores them, they turn on each other), uncertain career paths and increasingly untenable positions. Which is what they were, until the Western world handed them prominence to the tune of hundreds of billions of dollars.

Bruce would, I think, agree. Here is his conclusion:

We also need to pay more attention to the socially marginalized than to the politically downtrodden, like unassimilated communities in Western countries. We need to support vibrant, benign communities and organizations as alternative ways for potential terrorists to get the social cohesion they need. And finally, we need to minimize collateral damage in our counterterrorism operations, as well as clamping down on bigotry and hate crimes, which just creates more dislocation and social isolation, and the inevitable calls for revenge.

Google has resurrected their oldest available index (from 2001) - fun to search for "blogging", "wikipedia", "social software", "web 2.0" and "facebook".

Now, there is a brilliant market move. Endnote is primarily used by academics. I have used it since around 1991, and for a couple of years I was a beta tester (and had the T-shirt to prove it.) Aside from the T-shirt, I got zilch for my efforts (and I did find a bug or two.) Neither did the thousands of academics who have created bibliography styles for various journals and uploaded them to Endnote's web site.

I can't think of a better way than a law suit to make people move to Zotero. This definitely does it for me - unless Thomson Reuters pulls this stupid suit. Come to think of it, we have a number of users at the Norwegian School of Management, I am sure I can persuade quite a few of them to switch sides.....

Suing an academic for creating software for other academics which draws on work of other academics when your primary market is academics? Have they hired hired lawyers from the music industry?

Zotero is a better tool, too. Shared lists, bibliographies, support for clipping from searches, including Google Scholar. Instant saves from browsing.

Time to move, methinks. Let me see, how hard would it be to migrate my 2100+ article database....

Update two hours later: Boingboing is on the case.

Update 10 hours later: Check out the Boingboing comments - Streisand effect in the making. John Mark Ockerbloom has a thoughtful piece on the suit.

I side with Posner, if for nothing else that economic considerations - that is, economic from the view of each failing bank - has disappeared a long time ago. Government seats on boards is a small price to pay for a bailout. And as the markets rebounds, the government stake can be sold again.

Here in Norway, this actually happened - the government took over failing banks in 1987, at one point owning almost all of them, then selling them out again. Worked reasonably well, except for the bank shareholders, of course. But that is the point of shares - you can claim ownership to all the assets and all of the residual return. If the assets disappear, so does your claim.

Update:  Check out Tom Evslin's nice little demonstration of how we got into this mess in the first place.

My interpretation: Information access is now close to free. What you now need is understanding. That takes people, and if you can access the smart ones in person as well as their explicated output, you will do well.

The purpose of this book is both to tell a story and to teach the (young) reader something about personal freedoms, critical thinking and how to preserve your privacy in an increasingly connected and digitized world. This shows - there are some quite detailed discussions of this, somewhat simplified versions of Cory Doctorow's speeches and writings on these subjects.

I sort of liked the book - it is important from the perspective of raising a generation of youngsters that know enough about the technology to maintain some sort of privacy, and encourage creative thinking - loosely defined as demanding logic and actions in proportion to consequences from the authorities. Cory's book has gotten to the NYT bestseller list, and deservedly so. This is something to be happy about, for Cory spreads the word of his book electronically (as well as the book) and this nicely vindicates that strategy and points towards the future for aspiring authors. And, as someone struggling to get young people to read about and be interested in technology - not just what it does and how it looks but how it works - I see the value in the book.

But I do wish the literary qualities, such as the plot and the character development, were a bit more ambitions. On the other hand, Neal Stephenson does that, and Little Brother is an excellent introduction to Cryptonomicon, which set the reader up for the Baroque Trilogy and the idea that, well, history matters.

So, highly recommended. Wonder when we will see the first Norwegian translation? (I have translated for Cory before, but am a bit under the weather here. Anyone for a "dugnad"?). It is not like anyone needs to ask permission...

(On a side note, the paper copy I got from Amazon had half of page 197/8 torn out. Rather than sending it back to be replaced (which I know Amazon would do without argument), I printed out those pages from Cory's web site and put them inside the book. Saves work and time. Same thing as when I switched from a static web page to a wiki for my course syllabi - now the customers, i.e., my students, fix broken links without bothering me.....)

Anyway, I was at an HBS alumni conference last week, and the topic, of all things, was technology trends and financial crises, with speakers such as Martin Wolf, Carlotta Perez and Erik Reinert. One interesting point which was brought up was the US curious insistence on always having cheap energy: Not only is there no tax on gasoline (which would have brought down consumption and emissions, given the national coffers some badly needed cash without having to sell Treasury bonds, and reduced dependence on foreign oil), but the US, according to another speaker, subsidizes coal production to the tune of $50b per year. Stop doing that, and you would help the environment and could buy yourself an investment bank every year....

HBS 100th Anniversary

Soria Moria Hotel, Oslo

Only one of Schumpeter's ideas accepted: Technical change is the driver of economic growth. But it is not totally random, it has continuities and discontinuities.

1970: Low cost microelectronics, sw, computers, internet, digital telecommunications....

1907: Mass production, low cost petroleum fuels, universal highways and electricity networks

Success may depend on anticipating the future, which you can do by looking at the past. There are powerful regularities and identifiable specificities in technological revolutions: Comes every 40 to 60 years, at the end of maturity of the previous technology, and has a similar sequence of diffusion in two periods of 20 to 30 years, with a financial crisis in between.

Tech revolution and techno-economic paradigms

Five revolutions: 1771 Industrial revolution, 1829: age of steam and coal, iron and railways. 1875 age of steel and heavy engineering (electrical, chemical, civil and naval); 1908 Age of the automobile: 1971 Age of the information technology and telecommunications. Next one may be biotech, bioelectronics, nanotech and new materials.

We are only halfway in the IT revolution. And each revolution takes about half a century to spread around the world.

Each revolution has a double nature: the create new industries that function as engines of growth, but there is also a new techno-economic paradigm. The first creates an explosive growth, the second modernizes and rejuvenates the mature industries.

The diffusion of each technological revolution confronts enormous resistance from institutions deeply adapted to the previous paradigm. Therefore, each technological propagates in two different periods: Installation and deployment. The first half sets up the infrastructure, usually with over-investment, but the infrastructure stays. It is a period of creative destruction, of unlearning, lead by financial capital, ends in a stock-market crash. The second is one of creative construction, led by production capital, applying the paradigm to innovate across all sectors and to spread the social benefits more widely - until maturity and exhaustion.

Why the bubble?

The capitalist economy is shaped by two different and functionally separate agents: Production capital (agent of accumulating wealth-making capacity) and financial capital (agent for reallocating and redistributing). Production capital has a long-term bias, financial capital has a short-term bias. Financial capital is better at massively redirecting resources and force new paradigm diffusion. Production capital is better for carrying growth and expansion within an established paradigm.

The role of the state changes: In installation period - the gilded age - the market does it all. In the deployment stage - the golden age - the state has an intelligent come-back, promoting long term growth.

Three investment paths for assuring long-term growth

Financial wealth and production wealth can both be destroyed, but for financial wealth you normally cannot influence it.

The best investment for the future is the capacity for technical change. Short-term, this means fostering innovation and entrepreneurship in the current paradigm. In the medium-term it means betting on the gestation of the next revolution. Insuring the long-term future means favoring open-ended science increasing the quality of human capital.

The current techno-economic paradigm shift is from the logic of cheap energy to the logic of abundant information. The new paradigm is still wrapped in the old, because cheap oil and cheap Asian labor favored stretching the old paradigm. But rising material and oil prices will lead to rising packaging and freight costs. Every little thing is wrapped in energy, such as cardboard or plastic. The visible effects of increasing global warming, with a rising climate risk (more Katrinas). There will be a change in the production, transport and distribution of tangible goods, leading to changes in business strategies and government policies.

The major transformations to expect (or to participate in): [lots of things], two being changes in lifestyle and urban planning towards activities and foot transportation.

Long-term funding: In the knowledge society, redistribution is not enough. Open-ended science works like a rich genetic pool. Investing in science, technology, education and entrepreneurship counteracts inflation by increasing average productivity. It is time to abandon market fundamentalism and agree ton a shared strategy to put order in finance and to collectively promote innovation to insure the future.

Martin Wolf: Challenges of globalization
HBS 100th Anniversary
Soria Moria Hotel, Oslo

Timing of this conference is very prescient....

This financial crisis is more interesting than the Depression, since it is taking out the core of Wall Street.

"Let China sleep, for when she wakes, she will shake the world." -- Napoleon Bonaparte

"The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war." Alan Greenspan, FT, March 16th, 2008

"Simply stated, the bright new financial system - for all its talented participants, for all its rich rewards - failed the test of the market place." Paul Volcker, April 8, 2008

Three of the five biggest investment banks have disappeared since he said that....and the others may not be around for another week or so.

What is driving the world economy?

It is the biggest globalization and convergence story of all time (last 20 years). There is a global move to the market, with liberalization of barriers to trade and capital flows, declining costs of transport and communications (half the world's population has access to mobile phone in 2010), entry of countries containing billions of people into the world economy (China, India and former Soviet Union has doubled the world's labor force) and the growth of those economies

What is upsetting the world economy?

Hyman Minsky: Success leads to excess. A world of low inflation and strong growth generates confidence.

Global imbalances also lead to monetary excess, asset price booms and credit explosions. The US was the target for global excess savings, but if a country spends more than its income, so must its citizens. US Households did most of that spending. Surplus of capital everywhere, 70% of it going to the US. UK, Spain and Australia also large importers of capital. The problem continues: China's surplus is $400b annually already, and rising. This ultimately leads to revulsion, house prices collapse. What makes it worse is that inflationary pressures have risen, too, largely because of rising commodity prices due to more demand from China - the one-off impact of globalization has weakened.

(One reason for the housing boom is that the stock market has been depressed since 2000.)

The striking feature of this from the capital exporting side (aside from Germany and Japan, which accumulate capital and the waste it, mainly abroad), 5,5 trillion in foreign currency, mainly in the US, by China, Japan, Asia, oil exporters and Russia.

Hyman Minsky: when times are good, investors take on risk, the longer times are good, the more risk they take on. Ultimately, they take on too much risk, asset prices overshoot, and then fall, debt is called in, and the system collapses.

We are at the early end of this disaster....

What is the future of global capital markets?

This is a fundamental shift. The savings-surplus countries have with massive capital funds, much of it in sovereign wealth funds (larger than hedge funds and private equity already, 5% of global capital). The countries that need investments don't have reliable capital markets.

Conclusion

Globalization itself is an immensely powerful political, economic and technologic process, though it is not by any means guaranteed to continue. Capital market integration has proved to be highly unstable. governments are going to be much bigger players in global capital markets form now on.